Question 1

As a result of the United States suspending gold sales to foreign countries in 1968,

Accepted Answer

When the United States suspended gold sales to foreign countries in 1968, countries with balance-of-payment surpluses against the United States were encouraged to allow their economies to expand, rather than adjusting their exchange rates or requiring the U.S. to run an ORT surplus. This was part of broader efforts to address imbalances without relying on gold transfers.

Question 2

From 1985 to 1987,there was a huge ________ of the dollar,meaning that it became on average ________ expensive to foreigners.

Accepted Answer

From 1985 to 1987, the dollar experienced a depreciation, which means it lost value compared to other currencies. As a result, it became less expensive for foreigners to purchase goods and services priced in dollars.

Question 3

Suppose that you travel from the United States to Japan this summer and the dollar has appreciated relative to the yen.Your total trip costs,assuming you buy the exact same goods and services,will

Accepted Answer

If the dollar has appreciated relative to the yen, it means that the dollar can buy more yen than before. This also means that the yen can buy fewer dollars. Therefore, when you buy goods and services in Japan, you will need to pay fewer yen for the same amount of dollars than before the appreciation. As a result, your total trip costs will fall in dollar terms.

Question 4

An increase in the net debtor status of the United States will serve to reduce the well-being of U.S.citizens because

Accepted Answer

An increase in the net debtor status means the country owes more to foreigners than it is owed. To reduce this debt, the U.S. would need to either decrease imports (A) to reduce the outflow of funds or increase exports (C) to bring more funds into the country, both of which can help balance the international payments and reduce the net debtor status. Exporting gold (B) is not a contemporary mechanism for settling international debts.

Question 5

The difference between the value of the foreign assets owned by a nation's citizens and the nation's assets owned by foreign citizens is called the

Accepted Answer

The net international investment position is the difference between the value of foreign assets owned by a nation's citizens and the nation's assets owned by foreign citizens. The current account balance refers to transactions in goods, services, and income, while the capital account balance refers to transactions in financial assets and liabilities. The balance of payments outcome is a comprehensive summary of a country's economic transactions with other countries and includes both the current and capital accounts.

Question 6

If the dollar depreciates against the yen,this tends to ________ our imports of Japanese goods and ________ our exports of goods to Japan,so that our net exports ________.

Accepted Answer

When the dollar depreciates against the yen, it becomes relatively cheaper for American consumers to buy Japanese goods, therefore increasing our imports of Japanese goods. On the other hand, it becomes relatively more expensive for Japanese consumers to buy American goods, leading to a decrease in our exports to Japan. As a result, our net exports decrease.

Question 7

Suppose that you are the representative of IBM selling computers manufactured in the United States to German companies.If the dollar appreciates,your prices in euros

Accepted Answer

The answer of Suppose that you are the representative of...

Question 8

Over the 1981-1991 decade,had the U.S.current account been in zero balance,the total income of Americans from their net investment position would have been about

Accepted Answer

The total income of Americans from their net investment position would have been about 1 percent higher if the U.S. current account had been in zero balance over the 1981-1991 decade. This suggests that the imbalance in the current account had a relatively small negative impact on the income Americans earned from their net investments.

Question 9

If the European Central Bank buys dollars with euros,this causes the euro to ________ against the dollar,assisting European ________.

Accepted Answer

When the European Central Bank buys dollars with euros, it increases the supply of euros in the foreign exchange market while increasing the demand for dollars. This action causes the euro to depreciate against the dollar. A weaker euro makes European goods cheaper for American buyers, thus assisting European exporters of goods to America.

Question 10

The Vietnam War required the U.S.government to spend large amounts of dollars overseas.This effort

Accepted Answer

The Vietnam War required the U.S. government to spend a significant amount of dollars overseas, thereby causing an excess supply of dollars in foreign exchange markets. According to the law of supply and demand, this leads to a decrease in the exchange rate of the dollar. Thus, the most appropriate choice is (C) - caused excess supply of dollars, and the exchange rate fell.

Question 11

From 1980 to 1985,the effective exchange rate of the dollar against other major currencies ________,and then from 1985 to 1987 the rate ________.

Accepted Answer

From 1980 to 1985, the effective exchange rate of the dollar against other major currencies rose dramatically due to high interest rates in the United States attracting foreign capital. From 1985 to 1987, the rate fell back to its 1980 level as a result of the Plaza Accord and subsequent interventions in the currency markets.

Question 12

The emergence of the United States as a net debtor country implies that

Accepted Answer

Option A is correct because as a net debtor country, the United States will have to pay investment income to foreign creditors. To do so, it will have to generate sufficient export sales to earn foreign currency that can be used for these payments. Option B is correct because the dollar will have to depreciate more than otherwise to offset the impact of the growing amount of investment income flowing out of the country. Therefore, both A and B are correct, making option D the best choice. Option C is incorrect because the real income of Americans is unlikely to decline solely because of the emergence of the United States as a net debtor country.

Question 13

In the late 1980s,foreign central banks ________ billions of dollars in order to ________ of the dollar.

Accepted Answer

Foreign central banks bought billions of dollars to slow down the depreciation of the dollar, aiming to stabilize its value and maintain economic balance.

Question 14

During the Vietnam War years the U.S.official reserves transaction balance was negative and U.S.reserve assets declined.With the fixed exchange rate system during those years,the United States was able to run a deficit on current account because

Accepted Answer

Foreign countries' central banks accepted the U.S. currency as an international reserve, which allowed the United States to continue running a current account deficit. This was possible because the U.S. dollar was widely accepted as a reliable medium of exchange and a store of value throughout the world.

Question 15

In 1985 the United States was in a "net debtor" position.This description means that

Accepted Answer

A "net debtor" position means that a country owes more to foreign creditors than it is owed by foreign debtors. Therefore, U.S. assets abroad were less than foreign assets in the United States in 1985.

Question 16

From 1981 to 1998,the U.S.net international investment position

Accepted Answer

The answer of From 1981 to 1998,the U.S.net international investment...

Question 17

From 1995 to 1998,the ________ of the dollar led to ________.

Accepted Answer

From 1995 to 1998, the appreciation of the dollar led to a collapse in net exports. This is because a stronger dollar makes US goods more expensive for foreign consumers, reducing demand for US exports and increasing demand for cheaper imports, leading to a trade deficit.

Question 18

Which of the following took place during the period 1980-85?

Accepted Answer

The United States employed a tight fiscal, easy money policy during the period 1980-85, while major European countries generally followed a tight fiscal policy.

Question 19

Suppose that initially we have an exchange rate of 130 yen to the dollar.Suddenly trouble develops in the Japanese stock market,making American stocks more attractive than before.We expect that the dollar will ________ against the yen,meaning that it will cost ________ than 130 yen.

Accepted Answer

When a country's market suffers from instability, its currency is likely to depreciate. Therefore, when trouble develops in the Japanese stock market, the yen is likely to depreciate against the dollar. This means that it will cost more than 130 yen to buy a dollar, so the dollar will appreciate against the yen.

Question 20

What is the major reason for the increased volatility of both exchange rates and net exports after 1973?

Accepted Answer

The major reason for the increased volatility of both exchange rates and net exports after 1973 was the move towards flexible exchange rates in the world economy. Flexible exchange rates allow the exchange rates to be determined by market forces rather than fixed exchange rates, which were determined by government intervention. This increased volatility and uncertainty in exchange rates, which in turn affected net exports as the cost of producing and exporting goods varied with changing exchange rates.

Quiz 7: International Trade, exchange Rates, and Macroeconomic Policy

As a result of the United States suspending gold sales to foreign countries in 1968,

From 1985 to 1987,there was a huge of the dollar,meaning that it became on average expensive to foreigners.

Suppose that you travel from the United States to Japan this summer and the dollar has appreciated relative to the yen.Your total trip costs,assuming you buy the exact same goods and services,will

An increase in the net debtor status of the United States will serve to reduce the well-being of U.S.citizens because

The difference between the value of the foreign assets owned by a nation's citizens and the nation's assets owned by foreign citizens is called the

If the dollar depreciates against the yen,this tends to our imports of Japanese goods and our exports of goods to Japan,so that our net exports .

Suppose that you are the representative of IBM selling computers manufactured in the United States to German companies.If the dollar appreciates,your prices in euros

Over the 1981-1991 decade,had the U.S.current account been in zero balance,the total income of Americans from their net investment position would have been about

If the European Central Bank buys dollars with euros,this causes the euro to against the dollar,assisting European .

The Vietnam War required the U.S.government to spend large amounts of dollars overseas.This effort

From 1980 to 1985,the effective exchange rate of the dollar against other major currencies ,and then from 1985 to 1987 the rate .

The emergence of the United States as a net debtor country implies that

In the late 1980s,foreign central banks billions of dollars in order to of the dollar.

During the Vietnam War years the U.S.official reserves transaction balance was negative and U.S.reserve assets declined.With the fixed exchange rate system during those years,the United States was able to run a deficit on current account because

In 1985 the United States was in a "net debtor" position.This description means that

From 1981 to 1998,the U.S.net international investment position

From 1995 to 1998,the of the dollar led to .

Which of the following took place during the period 1980-85?

Suppose that initially we have an exchange rate of 130 yen to the dollar.Suddenly trouble develops in the Japanese stock market,making American stocks more attractive than before.We expect that the dollar will against the yen,meaning that it will cost than 130 yen.

What is the major reason for the increased volatility of both exchange rates and net exports after 1973?